Money & Banking

Gold recycling hits 8-year-high on record prices

Suresh P. Iyengar Mumbai | Updated on November 04, 2020

Distressed jewellers join consumers in melting inventory to meet short-term stress

High gold prices pushed the recycling of the yellow metal to an eight-year-high of 41 tonnes in the September quarter, with both consumers and some of the distressed jewellers recycling their inventory to meet immediate cash requirements.

Average gold prices jumped 37 per cent in the September quarter to ₹45,640 per 10 grams, against ₹33,329 logged in the same period last year.

In fact, prices jumped 65 per cent from ₹27,861 logged in 2018, according to the World Gold Council data.

Gold supply

Total gold supply registered a growth 11 per cent year-on-year to 136 tonnes in the September quarter after declining 92 per cent to just 24 tonnes in the June quarter.

Globally, gold recorded spectacular performance in the third quarter of this year, soaring to an all-time high of $2,067 an ounce in early August, driven by escalating fears over economic downturn caused by the Covid pandemic and massive stimulus measures introduced by central banks around the globe in an attempt to lessen the impact.

Given the consistent rise in gold price in a short span of time, consumers were willing to forgo the making charges of four to six per cent paid at the time of buying their jewellery, said Sanjay Mehta of Shahgun Enterprises, which buys old jewellery from consumers.

Moreover, he added that some of the small jewellers also recycled their jewellery inventory to meet financial obligations as banks and financial institution were not willing to lend to them during the Covid times.

Lenders to the bullion trade felt that opening of jewellery shops would be the last in the list of priorities for the government and, even if it is done, consumers would be cautious to visit them, he said.

Somasundaram PR, Managing Director (India), World Gold Council, said some of the distressed consumers also raised money by pledging gold jewellery, which is a very vibrant market with deep penetration in rural areas.

Cameron Alexander, Director, Precious Metals Research, Refinitiv, a financial market data and infrastructure provider, said that while gold prices may see some consolidation in short term, it should benefit from growing risks revolving around the second Covid outbreak and the global economic turmoil. “We may well see the yellow metal hit a fresh record before the year-end,” he said.

Published on November 04, 2020

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